Remit regarding a refit

A yacht manager was contracted to provide crew management and ISM consultancy for a superyacht. Although the manager was not contracted to provide technical management, the owner sought their advice on two refits. The manager reviewed the scope of works and the budgets from the refit yards as a favour to their client.

Unfortunately, both of the refit budgets overran and the owner claimed that the managers had been in breach of their duty of care by failing to recommend suitable repair yards, failing to budget properly and failing to properly supervise the refits. The owners alleged that while the management contracts had said that the manager was not providing technical management they had in fact done so.

A formal claim was made against the manager for €900,000 and a sole arbitrator was appointed by the parties.

The manager denied that they had accepted any responsibility for the refits. The owners own staff had chosen the yards. The manager had commented on the scope of works and the budgets provided but had not managed the refits. They had simply been kept in the loop in correspondence. The owner claimed that he had expected his managers to take an active role.

In addition, the majority of overspend was due to the works which were required by the yacht’s classification society. The owner had not suffered a loss due to the alleged negligence of their manager. The owner was obliged to pay the costs to keep the yacht in class.

The matter went to mediation where the claim was firmly rebutted. Ultimately ITIC agreed to the payment of US$25,000 in settlement. This was far less than the owner claimed he had incurred in legal costs. ITIC also paid the substantial costs of defending the claim of over US$110,000.

Although the owner’s allegations lacked merit the claim is an illustration of the dangers of informally providing advice outside the scope of the contract.